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Distributional Effects of Monetary Policies in a New Neoclassical Model with Progressive Income Taxation

Author

Listed:
  • Burkhard Heer; Alfred Maussner

    (School of Economics and Management Free University of Bolzano-Bozen)

Abstract

In our dynamic optimizing sticky price model, agents are heterogenous with regard to their assets and their income. Unanticipated inflation redistributes income and wealth. In order to model the wealth distribution, we study a 60-period OLG model with aggregate uncertainty. A positive technology shock increases the concentration of wealth as measured by the Gini coefficient considerably. In particular, a one percent increase of the technology level results in a one percent increase of the Gini coefficient. An unexpected expansionary monetary policy is found to reduce the inequality of the wealth distribution. In addition, we find that the business cycle dynamics in the OLG model in response to both a technology shock and a monetary shock are different from those in the corresponding representative-agent model

Suggested Citation

  • Burkhard Heer; Alfred Maussner, 2005. "Distributional Effects of Monetary Policies in a New Neoclassical Model with Progressive Income Taxation," Computing in Economics and Finance 2005 12, Society for Computational Economics.
    • Handle: RePEc:sce:scecf5:12
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    Cited by:

    1. Olivier Allais & Yann Algan & Edouard Challe & Xavier Ragot, 2020. "The Welfare Cost of Inflation Risk under Imperfect Insurance," Annals of Economics and Statistics, GENES, issue 138, pages 1-20.
    2. Yann Algan & Olivier Allais & Edouard Challe & Xavier Ragot, 2012. "Monetary Shocks Under Incomplete Markets," SciencePo Working papers Main hal-01169658, HAL.
    3. repec:spo:wpmain:info:hdl:2441/562ju27dra9dnp6j4nvhq0tgfq is not listed on IDEAS
    4. repec:hal:spmain:info:hdl:2441/562ju27dra9dnp6j4nvhq0tgfq is not listed on IDEAS
    5. Heer, Burkhard & Süssmuth, Bernd, 2013. "Tax bracket creep and its effects on income distribution," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 393-408.
    6. Yann Algan & Xavier Ragot, 2010. "Monetary policy with Heterogeneous Agents and Borrowing Constraints," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(2), pages 295-316, April.
    7. Larin, Benjamin, 2016. "Bubble-driven business cycles," Working Papers 143, University of Leipzig, Faculty of Economics and Management Science.
    8. repec:spo:wpmain:info:hdl:2441/1j0a1p4ifa98paomt4907gu4qo is not listed on IDEAS
    9. repec:hal:spmain:info:hdl:2441/1j0a1p4ifa98paomt4907gu4qo is not listed on IDEAS
    10. Nasfi Fkili Wahiba & Mahmoudi Dina, 2023. "Technological Change, Growth and Income Inequality," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 121-131, January.
    11. Scharrer Christian, 2021. "The effects of financing rules in pay-as-you-go pension systems on the life and the business cycle," German Economic Review, De Gruyter, vol. 22(4), pages 489-511, November.
    12. Burkhard Heer & Alfred Maußner, 2024. "Dynamic General Equilibrium Modeling," Springer Texts in Business and Economics, Springer, edition 3, number 978-3-031-51681-8, April.
    13. Pierre Monnin, 2014. "Inflation and Income Inequality in Developed Economies," Working Papers 1401, Council on Economic Policies.
    14. repec:spo:wpmain:info:hdl:2441/3ao9avev669hj9hvol1l0lr6im is not listed on IDEAS
    15. Mehmet Balcilar & Shinhye Chang & Rangan Gupta & Stephen M. Miller, 2018. "The relationship between the inflation rate and inequality across U.S. states: a semiparametric approach," Quality & Quantity: International Journal of Methodology, Springer, vol. 52(5), pages 2413-2425, September.
    16. Burkhard Heer, 2007. "On the Modeling of the Income Distribution Business Cycle Dynamics," CESifo Working Paper Series 1945, CESifo.
    17. N'Yilimon Nantob, 2015. "Income Inequality and Inflation in Developing Countries: An Empirical Investigation," Economics Bulletin, AccessEcon, vol. 35(4), pages 2888-2902.
    18. Arkadiusz Sieron, 2017. "Inflation and Income Inequality," Prague Economic Papers, Prague University of Economics and Business, vol. 2017(6), pages 633-645.
    19. Masaya Yasuoka, 2018. "Money and Pay-As-You-Go Pension," Economies, MDPI, vol. 6(2), pages 1-15, March.
    20. repec:prg:jnlpep:v:preprint:id:630:p:1-13 is not listed on IDEAS
    21. repec:hal:spmain:info:hdl:2441/3ao9avev669hj9hvol1l0lr6im is not listed on IDEAS

    More about this item

    Keywords

    Distribution Effects; Unanticipated Inflation; Heterogeneous Agents;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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